Statistical-mechanical aids to calculating term-structure models
- 1 December 1990
- journal article
- research article
- Published by American Physical Society (APS) in Physical Review A
- Vol. 42 (12), 7057-7064
- https://doi.org/10.1103/physreva.42.7057
Abstract
Recent work in statistical mechanics has developed new analytical and numerical techniques to solve coupled stochastic equations. This paper describes application of the very fast simulated reannealing and path-integral methodologies to the estimation of the Brennan and Schwartz two-factor term-structure (time-dependent) model of bond prices. It is shown that these methodologies can be utilized to estimate more complicated n-factor nonlinear models. Applications to other systems are stressed.Keywords
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